Business sector R&D and Australia's manufacturing trade structure

This study explores the link between R&D intensity and trade performance for Australian manufacturing in 1989-90. Net export, export and import intensity equations are estimated. Net export equations are also corrected for trade imbalance, which has been shown significantly to improve the likelihood of correct predictions of revealed factor abundances. The importance of testing for appropriate functional forms is emphasized. R&D data by industry of product field are clearly preferred over industry of enterprise data. The results reconfirm Australia's comparative disadvantage in R&D intensive manufacturing and the asymmetry in the impact of R&D intensity on net export and export intensity, despite the strong increase in business R&D expenditure and the many policy initiatives adopted during the 1980s aimed at promoting technological capability and increasing non-traditional manufactured exports.